Lack of proper guidance often induces stumbling blocks in life. The same holds true for the investing world as well. With a plethora of stocks flooding the market at a particular point of time, choosing stocks to design a winning portfolio becomes a herculean task without a word of advice from experts in the investing space. After all, investors are shelling out their hard-earned money into the unpredictable stock market and certainly won’t like to see the same go down the drain by making wrong choices.
The current uncertain scenario makes it all the more imperative for individual investors to be guided by experts.
The experts in the investing world are brokers who possess a thorough understanding of the stock market. They have deeper insight into what's happening in a particular company as they directly communicate with its management. They also talk directly to customers at times to gauge what they like or dislike about the products and services offered by the company. Moreover, they go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations.
Since brokers indulge in detailed research work, the question of their actions being arbitrary does not arise. Estimate revisions also serve as an important pointer regarding the price of a stock. In fact, an increase in estimates normally leads to stock price appreciation and vice versa.
Given the above backdrop, we designed a screen to shortlist stocks based on improving analyst recommendations and upward revisions to earnings estimates over the last four weeks. Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it is also included. The price/sales ratio takes care of the company’s top line, thereby making the strategy foolproof.
# (Up- Down Rating)/ Total (4 weeks) =Top #75: This gives the list of top 75 companies that have witnessed net upgrades over the last four weeks.
% change in Q (1) est. (4 weeks) = Top #10: This gives the top 10 stocks that have witnessed earnings estimate revisions over the past for weeks for the upcoming quarter.
To ensure that the strategy is a winning one, covering all bases, we have added the following screening parameters:
Price-to-Sales = Bot%10: The lower the ratio the better, companies meeting this criteria are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio.
Price greater than 5: A stock trading below $5 will not likely create significant interest for most investors.
Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be significant to ensure that these are easily traded.
Market value ($ mil) = Top #3000: This gives us stocks that are the top 3000 if one judges by market capitalization.
Com/ADR/Canadian= Com: This takes out the ADR and Canadian stocks.
Here are five of the 10 stocks that passed the screen test:
Beazer Homes USA BZH designs, constructs and sells single-family and multi-family homes in the United States. The stock sporting a Zacks Rank #1 (Strong Buy), currently, has seen the Zacks Consensus Estimate for current-year earnings being revised 20.6% upward over the past 60 days.You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Menomonee Falls, WI, Kohl’s Corporation KSS is a department store chain that operates specialty department stores and an e-commerce site in the United States. The stock carries a Zacks Rank #3 (Hold), currently. The company’s bottom line outpaced the Zacks consensus estimate in three of the last four quarters, missing in the other quarter, the average beat being 25.6%.
Party City Holdco PRTY is the leading party goods company in terms of revenues in North America. The stock presently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-quarter earnings has climbed 44% over the past 60 days.
Caleres CAL, a footwear retailer and wholesaler, is headquartered in St. Louis. The stock carries a Zacks Rank of 3, currently. The Zacks Consensus Estimate for next-year earnings has moved 7.3% north over the past 60 days.
Dillard's DDS, carrying a Zacks Rank #3 currently, is a large departmental store chain featuring fashion apparel and home furnishings. The Zacks Consensus Estimate for current-quarter earnings has been raised 13.8% over the past 60 days.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance
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Kohls Corporation (KSS) : Free Stock Analysis Report
Dillards, Inc. (DDS) : Free Stock Analysis Report
Beazer Homes USA, Inc. (BZH) : Free Stock Analysis Report
Caleres, Inc. (CAL) : Free Stock Analysis Report
Party City Holdco Inc. (PRTY) : Free Stock Analysis Report
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